Ask An Indirect Tax Expert: North Carolina Service Tax

During a recent Sales Tax Rate Update webinar given by ONESOURCE Indirect Tax the following question was submitted by an attendee. Our tax experts have submitted their response below.

Questions:
Is the new NC service tax n/a if the service is to production = mill equipment?

Answer:
North Carolina imposes a tax on sales of tangible personal property and selected services. N.C. Gen. Stat. § 105-164.4. Applicable to sales made on or after January 1, 2014, the general rate of tax applies to the sales price of a service contract. (N.C. Gen. Stat. §105-164.4(a)(11).) Effective January 1, 2014, a “service contract” means a warranty agreement, a maintenance agreement, a repair contract, or a similar agreement or contract by which the seller agrees to maintain or repair tangible personal property. (N.C. Gen. Stat. §105-164.3(38b)). A single repair transaction between a retailer and a purchaser for tangible personal property that is not completed pursuant to a “service contract” sold to a purchaser is not a service contract. North Carolina Department of Revenue has issued a Directive with detailed information of the changes. Please refer to it for further explanation.